U.S. Attorney General Eric Holder, center, announces the plea agreement with Credit Suisse AG Monday in which the European bank agreed to pay about $2.6 billion in penalties. Joining Holder at the Justice Department news conference were IRS Commissioner John Koskinen, left, and Deputy Attorney General James Cole. (AP/Evan Vucci)
U.S. Attorney General Eric Holder Jr. on Monday defended his record on prosecuting large banks, announcing a $2.5 billion deal with Credit Suisse and foreshadowing additional prosecutions.
Holder said the case against Credit Suisse, which pleaded guilty to a conspiracy charge on Monday, showed “no bank is too big to jail.”
The plea agreement includes the payment of $715 million to the New York State Department of Financial Services (DFS), where regulators said Credit Suisse used its New York Representative Office office as a hub for a cross-border private banking business which helped customers hide assets subject to federal and state taxes.
The New York regulators said that as part of the plea deal, three Credit Suisse employees who had remained on the bank’s payroll despite being under indictment were being terminated.
Based on the fine, the terminations and enhanced monitoring the state department demanded Superintendent Benjamin Lawsky said the agency will not initiate proceedings to revoke Credit Suisse’s New York license.
Holder for weeks had vowed new criminal actions against major financial institutions. The dearth of major criminal cases against big banks and Wall Street executives has long been a source of attention, and criticism, for the Justice Department.
Credit Suisse, charged in the Eastern District of Virginia with helping clients avoid paying U.S. taxes, was the largest bank to plead guilty in 20 years, the Justice Department said.
“This case shows that no financial institution, no matter its size or global reach, is above the law,” Holder told reporters Monday evening at a press conference. “We will never hesitate to criminally sanction any company or individual that breaks the law. A company’s profitability or market share can never and will never be used as a shield from prosecution or penalty. And this action should put that misguided notion definitively to rest.”
Prosecutors alleged in the one-count information that Credit Suisse helped American clients conceal assets in secret, offshore accounts to avoid paying taxes to the IRS. Hundreds of Credit Suisse employees, including managers, “wilfully aided and abetted” the conspiracy, according to prosecutors. The scheme, the government alleged, lasted decades.
A team from King & Spalding, including partner Christopher Wray, represented Credit Suisse. Wray was a former assistant attorney general in charge of the Justice Department’s Criminal Division during the George W. Bush administration. Chief Judge Rebecca Beach Smith of U.S. District Court for the Eastern District of Virginia presided over the Monday plea hearing.
“We deeply regret the past misconduct that led to this settlement,” Credit Suisse Chief Executive Brady Dougan said in a statement, according to Reuters. “We have seen no material impact on our business resulting from the heightened public attention on this issue in the past several weeks.”
Holder said he hoped the Credit Suisse announcement would mark “a firm and unequivocal message to anyone who would engage in dishonest or illegal financial activity that the Justice Department does not, and we will not, tolerate such activities.”
At the press conference, Holder was asked whether the Justice Department treated foreign banks differently than U.S. financial institutions. “If there are domestic banks that have similar fact situations or other fact situations that we think warrant the bringing of criminal charges, we will simply bring them,” Holder said.
Credit Suisse, Holder said, “will move forward,” notwithstanding potential “serious follow-on actions by regulatory agencies.”
“We are mindful that guilty pleas by a bank can have impacts far beyond the parties to the plea,” Deputy Attorney General James Cole said in a written statement. “This plea demonstrates that the Department of Justice and bank regulators are prepared to hold banks and their relevant employees accountable while being mindful of the impacts on depositors and the American public.”
Cole added: “The coordination required for this result can take considerable time, as in this case, but it is work that we deem important.”
In April, Holder defended his Justice Department’s record on the prosecution of banks. “This department’s record under my leadership will I think stand the test of time, I’ll compare it to any other justice department, any other attorney general, at any other time,” Holder testified then.
Under an order issued Monday by New York’s Lawsky, his department will require an independent monitor of its choosing to review the bank’s operations, the extent to which its executives contributed to Credit Suisse’s illegal activities and the company’s effectiveness at correcting the problems.
“DFS intends to install an aggressive and fair monitor who will report directly to DFS in order to further address the deficiencies at the bank that contributed to this misconduct,” he said in a statement.
Lawsky also said the bank agreed to terminate three executives including Markus Walder, the head of the company’s Offshore Banking division, and two others under indictment, Susanne Ruegg Meier and Marco Parenti Adami. Meier and Adami were senior managers of Credit Suisse’s cross-border banking business.
As to the decision not to seek to rescind the bank’s operating license in New York, Lawsky noted that the bank’s Representative Office in New York, which was at the heart of the alleged malfeasance, has been shut down and the work of the office been abandoned.
He said that the misconduct was not the work of a “few bad apples,” but, rather reflected an ingrained way of doing business at Credit Suisse.
“Facilitating tax evasion was a strategy and business model that the firm engaged in for decades,” Lawsky said.